Basescu opts for borrowing EU funds with IMF supervision

Romanian authorities told the European Commission (EC) that it plans to borrow some €6-7 billion from the European Union (EU), and to sign a supervisory agreement with the International Monetary Fund (IMF), according to President Traian Basescu yesterday.

While stressing that he is not considering a loan from the IMF, because this would draw Romania back to the 1990s, Basescu said the country needs a supervisory agreement with the fund, because the EU lacks such a tool to check how funds lent to member states are spent.

However, Basescu indicated that an agreement with the IMF should not include conditions for Romania, and that the EU must fulfill its commitments to member states, also granting loans to countries outside the euro-zone.

Basescu denied that the authorities are discussing loans from the European Bank for Reconstruction and Development (EBRD) or the European Investment Bank (EIB). Both an IMF and EC missions are currently in Romania to examine the country's macroeconomic situation and its outlook. A new commission is set to come to Bucharest to discuss a possible loan.

Sources close to the discussions between IMF representatives and Romanian officials said that a loan from the EC and supervised by the fund is not possible. "The required funds can only be attracted through collaboration between the two institutions, which would also carry out the supervision together.

The EC would not grant such a large amount, and lacks technical experience for such a loan," sources said. They added that, as happened in the case of Latvia and Hungary, the funds would be lent by both institutions. "The EC would grant funds for a certain financing need, while those from the IMF would be for another financing need," sources said.

Business Standard